Juggling Dynamite

The US faces the same issue as many aging nations today where entitlement promises become a ‘fiscal mountain’ over the next 19 years as the boomers move through. The top graph below shows how quickly costs will escalate and compound and especially once interest rates moderate away from the zero bound eventually over time. The growth rate in commitments is simply not something a smaller population of workers will be able to support.

But worse, as compared to other OECD nations, for the past 12 years the US has been collecting the lowest tax ratio from its populace. There are costs to maintaining a civil society, and for years now, US taxpayers have simply not been paying enough into their country’s coffers.

Bloomberg Government director of research Robert Litan offers some perspective on the latest news on the fiscal cliff negotiations and how big of a bargain is really needed. Here is a direct link.

Danielle was a guest today with Phil Mackesy on Talk Digital Network discussing recent developments in the world economy and markets. You can listen to the audio clip here.